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Chancellor Alistair Darling has told MPs he will act "within this financial year" to answer concerns about ending the 10p tax rate.

The main concern is that the withdrawal of the ten per cent tax rate will hit some 5.3 million of the UK's lowest earners and in response to this claim, Treasury committee MPs are to commence a short inquiry to investigate its effect.

According to the BBC, the Chancellor made the commitment during a meeting aimed at quelling a rebellion which could see the government lose a Commons vote next week, several MPs said. Some MPs said they thought Mr Darling might consider backdating compensation for low earners who have lost money.

But Treasury sources said all options were on the table and no details had been decided. After the meeting, Mr Darling said it had been "very useful".

The Finance Bill, which enacts this year's Budget, was given a second reading on Monday evening when MPs approved it by 298 votes to 223. However, the government could face a rebellion next week when amendments are put forward relating to the abolition of the 10p rate, introduced in Budget 2007.

The changes will mean that a single person, with no children, earning under £18,500 a year, will lose up to £232 a year.

The cross-party Treasury committee's inquiry will look into the effects of the abolition of the 10p rate, as well as the impact of other Budget decisions on low-income households. It aims to produce its recommendations for action before the Finance Bill completes its final passage through the Commons, probably no earlier than June.

Commenting on the current discussions, Chas Roy Chowdhury, head of taxation at ACCA, believes that a U-turn is possible: “The Chancellor can change his mind about this issue if he chooses to because reinstatement would not actually be an Exchequer expense.

“The Government’s current decision has a knock-on effect for personal taxes, tax credits and benefits to the tune of £4.6bn for the next three years, according to calculations from the CBI last year in response to 2007’s Budget.”